Birmingham is one of eight large British cities to have reached agreement on the 'City Deal'. Photograph: David Goddard/Getty Images

England's eight biggest cities outside London are to announce on Thursday that they have struck deals with the government to gain new powers over their transport, education and infrastructure building budgets.

Most of the cities will also say they are setting up combined authorities with other councils in their area to form larger legal bodies capable of driving through planning, infrastructure and transport decisions more effectively.

The cities – Birmingham, Bristol, Leeds, Liverpool, Newcastle, Nottingham, Sheffield and Manchester – have been negotiating with the cities minister, Greg Clark, and deputy prime minister, Nick Clegg, for six months to reach agreements with Whitehall on how to better invest in growth, provide skills and jobs, support local businesses and improve infrastructure.

As part of the "City Deals", Clark said he would advocate devolving power to local councils so long as they put in place stronger governance arrangements. He asked them to show they were going to be run by an elected mayor, or through a stronger community of local authorities. All the city councils have responded.

Clark and Clegg have won Whitehall approval for the permanent transfer of transport budgets and skills budgets for some of the cities. They will be allowed to borrow to build infrastructure on the income they will receive from being given access to increases in the business rate. They will also be able to set lower business rates for certain types of company – so reduced rates could be offered, for example, to companies specialising in computer-aided design.

Ministers say the "City Deals", proposed in this year's budget, could create 170,000 jobs and 37,000 apprenticeships over 20 years and unlock £8.2bn in infrastructure spending.

The proposal had been first laid out in the 2012 Budget. The cities will also be given more powers to lever in extra private finance. Two preliminary deals have been signed with Liverpool and Manchester. Clark said: "Our major cities have seized the opportunity to take control of their economic destiny and will now reap the benefits of new financial freedoms and investment opportunities available to them."

Julie Dore, leader of Sheffield council, said: "Last year in Sheffield, there were seven engineering jobs for every young person that trained for an engineering qualification – the current system doesn't work. The City Deal will mean that local people who best understand the needs of the local economy will decide how £23.8m of government skills funding should be invested."

In West Yorkshire, Leeds will combine with three local councils – Bradford, Wakefield and Huddersfield – in an attempt to rationalise delivery of economic growth.Ends